President Obama says
he wants to control health care costs, on the one hand, and to bring millions
upon millions of new persons into the health care system, on the other.
Seen together, the
president’s goals are contradictory and mutually exclusive. Here’s why:
If you intend to introduce tens of millions of new health care consumers
into the system, then the demand for health care products and services will
rise dramatically. When demand rises
dramatically, prices rise dramatically as well.
If the president wants to achieve his first goal, that of reducing
health care costs, then achieving his second goal will make it impossible. What his left hand gives, his other left hand
takes away.
But suppose he
succeeds. That is, suppose he succeeds
not at both these goals, which is impossible, but at just one of them. What happens when the government drives down
prices, and what happens when demand for health care products and services
rises dramatically?
When the
government tries to control health care costs, the consequence for health care
providers like drug companies, medical instrument manufacturers, and doctors,
is to drive some of them out of health care altogether. That is, if Washington restricts the profits
of health care providers, some of those providers will re-allocate their quite
considerable investments in directions away from health care, to places where
government interference does not hinder or limit their financial success. They simply leave. In the wake of the coming government-induced
exodus from the tyranny of price controls, fewer health care providers can or
will remain. Fewer providers mean fewer
products and fewer services. In your
very first economics lesson, you learned that when the supply of a thing goes
down, its price goes up.
In other words,
the president’s program to control health care costs will produce the opposite
result. I promise you, health care after
the president’s reform goes into effect will not be cheaper than it is
today. Health care after his reform will
be more expensive than ever, far more expensive.
The costs faced by
a pharmaceutical company to develop new and effective drugs are staggering. Laboratories and equipment are staggeringly expensive. Outstanding scientists demand high
salaries. The path to FDA approval is
arduous, time consuming, and fraught with uncertainty. The advertisement and distribution of the
drugs that win approval are more costly still.
The upshot of all that expensive research, certification, and
advertisement is dicey at best, and massive sums of money can be -- and have
been -- lost.
In order to pay
for the development, approval, advertisement, and distribution of new drugs and
the cures they might make possible, therefore, drug companies must make
enormous amounts of money on existing drugs.
If they do not, the development of new drugs will be stymied and cannot
well continue. Thus, by holding down
prescription costs, by prohibiting what it considers exorbitant drug company
profits, the government is, therefore, also prohibiting future drug development
and future cures -- perhaps the one that will save your life or the life of a
loved one. We will never know what
things could have been accomplished and would have been accomplished in health
care if the government puts a lid on prescription costs. If Obama’s health care reform passes, more
people will get sick, more people will stay sick, and more people will die.
Consider the
doctors: If the government puts a cap on
what a doctor can make for, say, intestinal surgery, then the very talented and
intelligent folks who otherwise would have worked very hard to become wealthy
surgeons will figure out how to make a very good living in other ways, perhaps
in architecture, nuclear technology, or international trade. In the shadow of government-restricted prices
(and therefore government-restricted incomes), fewer and fewer of them will
decide to undergo the long, difficult, and exceedingly expensive path through
college, through medical school, through residency, and through certification
in order to become doctors who can expect to earn less for themselves and their
families than they would have earned had they turned their talents elsewhere
and followed an easier and less restricted path to greater wealth. The same thing will happen with the
pharmacists. If the president’s program
goes into effect, the result will be fewer doctors and pharmacists serving the
millions and millions more patients the president wants to get into the
system. In other words, there will be
long lines -- very long lines -- at the clinic, at the emergency room, and at
the pharmacy.
The lesson of
price controls is not new. Simply think
of the government-imposed control on gas prices in the 1970s and the chaos,
shortages, long lines, and rationing that followed in its wake -- only substitute health care for gas and
clinics for gas stations.
Or, to take a
lesson from countries like Canada and the UK (where government health care
plans have been in place for many years), waiting lines are unconscionably long
and some people actually die waiting for their turn in surgery because there
aren’t enough surgeons and operating rooms to meet the needs. To avoid that fate, Canadians often cross the
border to get medical care at their own expense in the US, in cities like
Detroit or Buffalo, where medical care is far more readily available than in
Canada. In other words, they come to the
system the president is trying to reform, and they leave the sort of system he
is trying to emulate. If the president’s
counter-productive plan goes into effect, even Canadians will die.
My point, if it’s
not obvious, is that, judging by the incentives it creates and the consequences
it generates, this is a health care plan from Hell.
But it’s worse
than that, far worse. By introducing
millions more folks into the system at the same time that his cost control
measures are shrinking that system, the president’s plan will strain our
remaining health care resources enormously, perhaps to the breaking point,
laying an unbearable demand upon what survives of a health care supply system
shrinking under the effects of government price control policy. The result for millions of Americans needing
medical care will be catastrophic. In
order to meet the burgeoning demands that an expanding clientele puts on a
shrinking system, the government will institute rationing.
Put succinctly,
price controls lead to shortages; shortages lead to higher prices and to long
lines; long lines lead to rationing; rationing health care leads to suffering
and death.
When family and
friends suffer or die because they couldn’t get the health care they required,
Americans will begin to regret the votes they cast in recent years, and they
will struggle to return to the system that served them better -- if by then a
return is still possible.
My dire tale of
higher prices, shortages, long lines and rationing is understated. I have purposely left the most expensive and
most dangerous part of the President’s health care reform until the end. To this point, I have focused primarily on
health care providers and health care consumers. I turn now to health care bureaucrats --
perhaps the most wasteful and dangerous element of the President’s entire
misbegotten scheme.
Depending upon
precisely what sorts of things one includes in the equation, health care is
approximately one-seventh of the entire American economy. To bring that much business under the watchful
(but myopic) eye of government requires a simply enormous army of
bureaucrats. To them will fall the power
of evaluation and analysis of every sort, and the power to enforce their
decisions. Almost nothing could be worse
– unless you decide to put it all under the IRS.
The notion that
government tax bureaucrats and career politicians are competent to determine
(from a distance, at a desk, or in a committee with other bureaucrats) what
drugs “ought” to be prescribed, what tests “ought” to be conducted, what
procedures “ought” to be undergone, and what “ought” to be the proper cost of
every consultation, operation, test, or procedure in every American locality
from Anchorage to Key West is unmitigated hubris and foolishness beyond
measure. Those bureaucrats do not even
know or understand how little their own jobs and services are worth; they
absolutely cannot know the worth of the jobs of medical researchers and
neuro-surgeons in varied localities across the nation, and what they “ought” to
be paid for doing them. Nor will they
know what things “ought” to be done for (or by) patients they have never met
and never will meet.
Precious few of
the apparatchiks empowered by the government to make these decisions will be
medically trained. Indeed, there aren’t
enough properly trained bureaucrats in the world to make this program
work. Almost none will have seen
face-to-face even one of the persons whose lives and health they hold in their
red tape entangled hands. Indeed, they
will not be dealing with persons at all, as they see it, but with “cases” –
cases that must be dealt with according to the case book, the standard
operating procedures compiled by other bureaucrats in other parts of government
who spend their professional lives doing equally impossible jobs with equally
deleterious effect.
Consider the bureaucrats. Like all other persons, bureaucrats are
creatures of incentive. Those with
careers in the medical bureaucracy will wish to succeed. They will wish to rise ever higher in the
bureaucracy, to be in charge of ever increasing portions of taxpayer money and
to exercise more power than now they do.
In order to rise up the bureaucratic ladder, they must preside well over
the affairs inside their bailiwick. They
must follow the rules. They must keep
their departmental budgets balanced.
While I am in favor of governments living within their means, the
implications of doing so in health care are staggering.
It often happens
that almost 90% of a person’s lifetime health care expenses occur in the last
two or three years of life. When we get old, we get expensive. If the
government is overseeing the program by which your health care costs get paid,
and if that program is dangerously low on money, the bureaucrat in charge of
your case, who knows that it’s cheaper to die than to live, who knows that his or
her budget is nearly depleted, and who wants to look good to his or her
superiors, will be sorely tempted to reason this way: “At 76, old Joe has had a long life. His country has been good to him for many
years. It’s time for Joe to pay the
system back. It’s time for Joe to cash
in his chips. That way, his own physical
suffering is ended; my personal and professional burdens are eased; and others
can move one step forward in the waiting line.
If old Joe dies, it’ll be better for everybody, including me and Joe.”
If you think I am
making this up, I absolutely am not. I have seen it with my own eyes and heard it
with my own ears directly from government bureaucrats themselves.
When government
bureaucrats invade health care, the inevitable result is something much like
veterinary medicine: If your dog is sick
and you take it to the vet, the vet examines it and says, “Spot has a problem,
and it will cost $300 to fix it. What
would you like to do?” The vet says it
to you, not Spot, because you are paying the bills. If you don’t have the money to pay for the
necessary procedures, it’s bad news for Spot.
Spot might die. When the
government is in charge of paying the health care bills, and the bureaucrat in
charge of your case doesn’t have the money, you’re Spot.
